This passage from an unfair dismissal decision of the Fair Work Commission contains observations about various remedies for unfair dismissal, including reinstatement and compensation.
“Remedy
[39] Having found that the Applicant has been unfairly dismissed, I now turn to the issue of an appropriate remedy.
[40] The Applicant seeks reinstatement to the position he occupied at the time of his dismissal. His evidence is that despite the shareholder action he is taking against his uncle, he believes that once it is over, Mr Seach will want him to continue working there.21
[41] The Respondent opposes reinstatement on the grounds that there has been a complete breakdown in the relationship between the parties and that there are no positions available for the Applicant to return to.22 The Applicant’s position as an estimator which involves calculating the costs of projects before work commences by estimating materials, labour and equipment costs, has been filled since the dismissal.
[42] The question is whether the loss of trust and confidence claimed is soundly and rationally based.23 A finding of a loss of trust and confidence must be made on an objectively reasonable and rational basis. The question of whether there has been a loss of trust and confidence is concerned with that which is essential to make an employment relationship workable. As the Full Bench in Ngyuen v Vietnamese Community in Australia24, held:
[28] Ultimately, the question is whether there can be a sufficient level of trust and confidence restored to make the relationship viable and productive. In making this assessment, it is appropriate to consider the rationality of any attitude taken by a party.”
[43] In my view, the evidence establishes that the employment relationship is unworkable and that reinstatement is untenable. Firstly, the Supreme Court proceedings in which the Applicant is a plaintiff, seeks the winding up of his employer, and does so on the basis that there is an irretrievable breakdown of the relationship of the shareholders. Whilst the Applicant submitted that this was only in respect of the relationship amongst the shareholders and has no bearing on his relationship with Breakwater as an employee, I have found that he has not been able to distinguish between the two roles. It would be remarkable for a person in his position to be able to do so. His relationship with his uncle, Mr Seach, who is the majority shareholder, director and also an employee, has entirely broken down with allegations about Mr Seach’s actions being the basis of the Supreme Court proceedings. Mr Seach has also not attended the workplace because of the conflict. The Applicant’s evidence that once the shareholder action is finalised, and if Mr Seach buys out the Applicant’s shares, he will want Mr Hampshire to continue working there, is fanciful. The Applicant’s evidence about his ability to work under Mr Winter’s leadership was also telling, with his first response being that Mr Winter would not be there for long. I consider that the Applicant would be unable to work constructively with the current CEO.
[44] The Applicant relied on the decision in Ngyuen v Vietnamese Community in Australia,25 where the Full Bench held that the fact that the applicants were pursuing legal action for alleged underpayments against their employer and that this gave rise to a level of acrimony, was not a matter to be taken into account in determining whether reinstatement is appropriate. However, that decision is distinguishable from the circumstances in this matter. In Nguyen, the Full Bench found it would be anomalous for the exercise of workplace rights to be a barrier to reinstatement, when it is unlawful to terminate employment because they have exercised a workplace right. In the present case, the legal action is not related to the exercise of workplace rights or some other protected action, and it is not the mere fact that legal action is on foot that is relevant, but that the Applicant contends that the relationship amongst shareholders has irretrievably broken down and seeks the winding up of the company.
[45] I also consider the evidence that some employees may resign if the Applicant is reinstated to be relevant but give it little weight. It is speculative and uncertain. I do consider relevant the impact of reinstating the Applicant on the concerted efforts of Mr Winter to address longstanding cultural issues, including on health and safety, in light of the evidence of the Applicant’s resistance to some of the changes and his sometimes cavalier attitude towards health and safety.
[46] Although not determinative,26 a further consideration is that the position the Applicant held is not vacant. Breakwater is not a large employer, with approximately 24 employees, and no alternative position has been identified that he could be appointed to.
[47] Whilst reinstatement is the primary remedy, it does not follow that because I have found the Applicant to have been unfairly dismissed, he is entitled to reinstatement.
[48] I am satisfied that the Respondent’s loss of trust and confidence is well-placed and rational, and reinstatement is not an appropriate remedy.
Compensation
[49] I am satisfied that it is appropriate in all the circumstances to make an order for payment of compensation. In assessing the amount, I am required by s 392(2) of the FW Act to take into account all the circumstances of the case including the specific matters identified in paragraphs
(a) to (g) of this subsection. I have applied the methodology in Sprigg v Paul’s Licensed Festival Supermarket27 as set out below:
Step 1:
Estimate the remuneration the employee would have received, or have been likely to have received, if the employer had not terminated the employment (remuneration lost).
Step 2: Deduct monies earned since termination.
Step 3:
Discount the remaining amount for contingencies.
Step 4:
Calculate the impact of taxation to ensure that the employee receives the actual amount he or she would have received if they had continued in their employment.
Step 5: Apply the legislative cap on compensation.
[50] Step 1 involves an assessment of what would have been likely to happen had Mr Hampshire not been dismissed. It involves an element of speculation which is a particularly finely balanced assessment in this case. Mr Winter is determined to significantly change the culture and management at Breakwater. The ensuing changes are likely to be challenging for Mr Hampshire to adapt to. He does not have a high opinion of Mr Winter and believes him to have been appointed by Mr Seach. It is possible that Mr Hampshire will face further disciplinary action for inappropriate behaviour, which would at some point constitute a valid reason for dismissal. Conversely, he may, given his deep commitment to the family business, adapt to the new culture and provide no basis for any future disciplinary action.
[51] Separately, the high level of tension between Mr Hampshire and Mr Seach is unlikely to be resolved until the Supreme Court proceedings are finalised. If resolved in the Applicant’s favour, the potential outcomes are that the business is wound up and ceases trading (and possibly bought out by a new entity), or that Mr Seach purchases the Applicant’s (and brother’s and aunt’s) shares. Whilst not entirely clear, each of these outcomes may well involve the Applicant ceasing his employment with Breakwater.28 The Supreme Court action does not appear to have been set down for trial, so finalisation may well be a considerable amount of time away.
[52] My overall assessment is that the Applicant would have continued to be employed for at least 12 months and would have earned $98,800 (gross) in that time.
[53] Since the dismissal, Mr Hampshire has earned $19,725, and deducting this leaves a provisional amount of $79,075. I do not consider it necessary to make any further adjustment in relation to further income reasonably likely to be earned, or the remaining considerations in s.392(2)-(3).
[54] The amount of $79,075 is more than half the compensation cap of $49,400. I therefore reduce the amount of compensation to that amount. I have determined to order compensation as a gross amount, with any required taxation to be dealt with by the parties.
Conclusion on compensation
[55] I am satisfied that the application of the Sprigg29 formula does not result in an amount that is clearly excessive or clearly inadequate.
[56] I consider that an order for compensation in the sum of $49,400 (less taxation as required by law) in favour of Mr Hampshire is appropriate in this case. An order will be made to that effect.”
Hampshire v Breakwater Metaland Pty Ltd [2024] FWC 1933 delivered 13 August 2024 per O’Ne